13 July 2021
Key takeaways
Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc reminds us of a number of important considerations that parties should keep in mind in the context of aircraft trading, and commercial dealings more generally:
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Time is of the essence: “[g]iven the history of delay, prevarication and procrastination”[1] on CSDS’ part, the court easily found that it had repudiated the Agreement at common law on 26 October[2]
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Affirmation of breach: CSDS unsuccessfully claimed that, in serving the proceedings seeking specific performance, SIA had irrevocably elected to affirm the sales agreement and waive past breaches.
In considering this, Cooke IJ held that “there is no absolute rule that a party cannot terminate, even whilst it has a claim for specific performance before the Court because a continued breach, a fresh breach or a refusal to comply with contractual obligations may all constitute further repudiatory conduct following the initiation of the proceedings.”[3]
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Specific performance will not always be available: While SIA’s engagement with CSDS makes clear its desire to complete the transaction, the maxim that contracts are made to be performed has its limits. Vendors of chattels should recall that such contracts are not susceptible, without more, of specific performance: damages are an adequate remedy.[4] A vendor must cut its losses and seek damages.
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Importance of alignment: purchasers must ensure that their funding arrangements are consistent the terms and conditions of their sale agreement so as to ensure that they are ready, willing and able to complete their sale and purchase transactions within their parameters.
The background
In September 2018 Singapore Airlines Ltd entered into a sale agreement (governed by English law) with California-based CSDS Aircraft Sales & Leasing Inc for the sale of a Boeing B777.
As is customary the sale agreement provided that before the sale would be consummated, amongst other things, payment of the price was required to be made by CSDS and the CSDS (a US entity) was required to appoint an English process agent. Time was made of the essence.
SIA insisted on these two conditions precedent being satisfied before putting the Bill of Sale in escrow. Contrary to the agreement, CSDS requested that the Bill of Sale to be placed in escrow prior to payment (seemingly to satisfy the conditions of its own funding arrangements).
Repeated failure by CSDS to pay led SIA to send a letter of demand on 23 October requiring CSDS to pay the balance of the purchase price by 26 October (ie within 3 days, rather than the 5 day grace period provided under the sale agreement). When this deadline was not met, in an attempt to progress the transaction, SIA couriered the Bill of Sale to the escrow agent under strict conditions and required CSDS to pay that night. When CSDS failed to pay, SIA informed CSDS that it would begin proceedings.
On 29/30 October CSDS sent a “formal notice” to SIA demanding return of its deposit on the basis that SIA had prevented its performance by refusing to put the Bill of Sale in escrow.
Negotiations continued but, on 31 October, SIA began an action in the Singapore High Court seeking specific performance of the Agreement and damages in the alternative.
On 4 November following further unsuccessful negotiations, SIA wrote to CSDS accepting CSDS’s repudiation of the sale agreement and terminating it with immediate effect (and, on 5 November, SIA amended its pleadings in Singapore to seek damages only).
For further information, please contact:
Alastair Henderson, Partner, Herbert Smith Freehills
alastair.henderson@hsf.com
[1] [45].
[2] [46].
[3] [94].
[4] Dougan v Ley (1946) 71 CLR 142, 149 (Dixon J).
